Air Canada, WestJet expected to take financial hit from 737 Max 8 ban

Canada’s two biggest airlines and some of their passengers are in for a turbulent ride after Transport Minister Marc Garneau announced a ban on all Boeing 737 Max 8 aircraft from Canadian airspace over safety concerns.

“For a week or two, it will be bedlam and chaos,” said Marvin Ryder, an assistant professor of marketing at McMaster University.

Garneau described the decision to ground the plane as a precautionary move that was made after a review of all the available evidence, four days after the Ethiopian Airlines disaster that killed all 157 people on board.

Air Canada has 24 Max 8s in its fleet and WestJet Airlines Inc. has 13. The carriers use the commuter planes daily to ferry passengers on routes that include Vancouver-Calgary, Honolulu-Vancouver, Vancouver-Montreal and Montreal-Los Angeles.

Ryder estimates the ban would cost the two airlines $100 million collectively in the first 10 days.

“They don’t have another 24 jets just sitting parked somewhere that they can bring into service to cover it…They’ll have to cancel flights,” he said.

Ryder explained the airlines may try to cut the number of flights on some routes and replace the Max 8 jetliners with larger planes.

The airlines’ shares reacted immediately to Garneau’s announcement, falling slightly before Air Canada’s rebounded while WestJet’s were down 1.66 per cent in midday trading. Prior to the announcement, their shares were down 3.4 per cent and 2.5 per cent, respectively, between Friday closing and Wednesday morning trading.

The suspension comes as thousands of Canadians are away on March break, stoking fears of stranded passengers and rebooking delays.

Air Canada and WestJet both said they are in the process of grounding their Max 8s.

Air Canada said it will grant affected customers a full fee waiver.

“We are working to rebook impacted customers as soon as possible but given the magnitude of our 737 Max operations which on average carry 9,000 to 12,000 customers per day, customers can expect delays in rebooking and in reaching Air Canada call centres and we appreciate our customers’ patience,” the company said in a statement.

WestJet noted that the grounding order affects just eight per cent of its 162-plane fleet.

Air Canada’s 4,000 pilots and 8,500 flight attendants said in separate statements they support Garneau’s move “to err on the side of prudence,” in the words of the Canadian Union of Public Employees.

Boeing Co., which makes the 737 Max 8, has seen its share price drop by more than 11 per cent in the past three days — a loss of more than US$26.6 billion.

As questions grow around the plane’s safety, Boeing rival Airbus SE has seen its stock rise nearly six per cent to US$132.45.

More than 40 countries have grounded or banned the Max 8 from their airspace since the crash over safety concerns and possible parallels to an Oct. 29 incident which saw the same type of aircraft plunge into the Java Sea, killing 189 people.